Nearly 60 percent of all misconduct that is observed in the workplace is never reported, according to Gartner, Inc. This lack of reporting creates big risks and challenges for employers of all types.
“Reporting misconduct is generally becoming more acceptable, in part due to increased social and political attention surrounding high-profile cases,” said Vidhya Balasubramanian, managing vice president at Gartner’s legal and compliance research group. “However, the majority of people still don’t report the misconduct they witness, primarily because they fear retaliation.”
“The majority of employees who observe misconduct, or think they might have, never report it. There’s an information gap here, especially when you consider that only 14 percent of the misconduct reports happen through official channels, such as the compliance team or HR.”
When employees do report misconduct, 68 percent make statements about what they have observed to their direct manager. Yet just two-thirds of managers say they feel adequately prepared to handle a report of misconduct, regardless of the issue. This means that those in charge of ensuring proper behavior in the workplace are only seeing a small fraction of the instances of misconduct that occur. It’s an incomplete picture from which to improve workplace culture and mitigate risks.
The Impact of Culture on Reporting
“Across over two million respondents from 167 organizations worldwide between 2009 and 2017, approximately two-thirds of employees saw their organization in the most favorable terms,” said Ms. Balasubramanian. “Seventy-two percent of these people reported the misconduct they witnessed, yet only seven percent of them said they had seen any misconduct at all.”
An employee’s perception of an organization is highly correlated to the rate at which they claim to have observed misconduct, and the likelihood that they will report it. Of the five percent of employees who rated their organizations unfavorably, 61 percent of them observed misconduct, but just half of them reported it.
“There’s a real danger that upper management can be out of touch with the nature and the extent of misconduct that is occurring in their organizations,” said Ms. Balasubramanian. “Without insight into what is happening on the ground, how can the company identify potential issues and attempt to rectify a poor culture?”
Fear of Retaliation
There is also a significant fear of retaliation for reporting misconduct. A fear of retaliation correlates with several observable variables, most notably educational attainment, seniority within the organization, and gender.
The survey also showed a big gap in fear of retaliation between different educational levels. Only 58 percent of employees who did not finish secondary education believed they could report misconduct without fear of retaliation. This number rises to 72 percent in those with a bachelor’s degree, and to 77 percent in those with a postgraduate degree.
Low Rates of Reporting
“The idea that less than half of all misconduct is never reported should cause alarm and drive action at the highest levels of many organizations. Many companies believe investing in hotlines and basic compliance processes may suffice, but at least one in three employees do not know whether their company has provided any way to anonymously seek guidance,” said Ms. Balasubramanian. “This means that almost every business is facing serious regulatory and compliance risks that are completely hidden.”
Such risks have serious consequences for individuals and organizations failing to address them properly. Clear examples of these consequences were seen throughout 2018 with fierce attention on misconduct scandals ranging from data breaches, to conflicts of interest, to sexual harassment.
“While companies may have previously responded to regulatory pressure, social and activist pressure from consumers, employees, and the media have now created even more urgency for investing in compliance and ethics efforts,” said Ms. Balasubramanian.
Gartner clients can read more in “10 Truths About Corporate Culture.”
If your organization is not yet a Gartner client, you can still access more resources at Gartner’s compliance topic hub.
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